According to a government official, a proposal to transfer Air India’s non-core assets and unsustainable debt to a special purpose vehicle is under serious consideration.

HIGHLIGHTS

Transfer of non core assets will help raise capital for Air India: Civil Aviation ministry

in May, Air India received no bids to sell its 76% stake.

Airline heavily burdened with debt of nearly Rs. 50,000 crore.

Government has proposed transfer of Air India's non-core assets and unsustainable debt to a special purpose vehicle (SPV) in order to revive the financially burdened national carrier. According to a government official, a proposal to transfer Air Indias non-core assets and unsustainable debt to a special purpose vehicle is under serious consideration.

Sources confirmed that finance and civil aviation ministries have already held two rounds of formal talks on the proposal.

The silver lining for loss making subsidiaries of Air India is ownership of assets nearly worth $4.6 billion.

A senior civil aviation ministry official said,"the airline has been suffering for some time. In May, it found no takers despite a 76% sale offer. So, the idea is to de-link the non-core assets, hand them over to a SPV and sell them off to raise the capital needed to make the airline stand on its feet.

Last month, the government had sought approval of parliament to infuse Rs 980 crore in the debt laden Air India. In June, the airline received an equity infusion of Rs 650 crore."The govt has no plan for additional capital infusion in Air India beyond what has already been budgeted, a government official said.

The RSS (Rashtriya Swayamsevak Sangh) and its affiliates, who had earlier expressed disapproval over privatisation of Air India, have backed the shift from strategic disinvestment to assisting the ailing airline.

Air India is heavily debt-laden and has been regularly incurring huge losses. The total debt including current liabilities stood at Rs 33,392 crore as on March 31, 2017. By March 2018, the figure crossed Rs. 50,000 crore as reported by MoneyControl.

During 2016-17, Air India reported a net loss of Rs 5,765.17 crore.

CAPA (Centre for Asia Pacific Aviation) India estimated the carrier would make losses of $1.5 billion to $2 billion over the next two years.

As per a Directorate General of Civil Aviation report for April 2018, Air India holds only 13.3 per cent market share with just 45.06 lakh passenger load.

The government had proposed to divest 76 per cent share in Air India. The transaction also included sale of its subsidiaries-Air India Express and Air India SATS Airport Services. However, no bidders showed interest in the stake sale.

Under the proposed disinvestment process, around Rs 33,000 crore debt would have remained with Air India.